Baidu, Inc. is a Chinese multinational technology company specializing in Internet-related services and products and artificial intelligence. Baidu is one of the largest AI and Internet companies in the world. This week, I fundamentally analyze Baidu’s stock. I review BIDU’s operating segments, look at its key ratios, derive the intrinsic value using Discounted Cash Flow (DCF) analysis, and calculate the expected rate of return from this investment. Since this is a long video, please feel free to use the time stamps in the video if you only wish to watch certain topics.
I review various key ratios such as Revenue, Net Income, Shares outstanding, Dividends, Payout Ratio, Free Cash Flows (FCF), Financial Leverage, Current Ratio, Debt to Equity Ratio, Return on Equity (ROE), Days Sales Outstanding (DSO), Days Inventory, Payable Period, Cash Conversion Cycle, Inventory Turnover, etc.
After taking into account 2020’s free cash flow of $3,019 million figure, a 6% growth rate of FCF (growth for the next 10 years), 10% discount rate, 4% long term growth rate (growth from 10 year mark to perpetuity), 335 million shares outstanding, and $9,654 million of long term debt, the DCF analysis yields us an intrinsic value of $149 per share. If we drop the discount rate from 10% to 9%, the intrinsic value comes to $187 per share. Using the current stock price of about $189 per share, and taking into the shares outstanding and future projects of free cash flows, we get the annual expected rate of return to be 5.4% if we hold this security through 2060.
0:31 Business Overview
3:36 Key Ratios Analysis
12:29 Discounted Cash Flow Analysis / Intrinsic Value
15:01 Expected Rate of Return Calculation
16:20 Summary / Conclusion
Baidu’s Website: here
Morningstar Key Ratios Link: here.
Useful Resources here.
Baidu, Inc. is a Chinese multinational technology company specializing in Internet-related services and products and artificial intelligence, headquartered in Beijing’s Haidian District. It is one of the largest AI and Internet companies in the world. The Baidu search engine is currently the fourth largest website in the Alexa Internet rankings.
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